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Tuesday, October 27, 2009

KEPZ couldn't start fully in 17 years Land transfer deed yet to be complete; row with DoE over clearance for developing industrial plots

Sharier Khan

Due to unexplainable hindrance from the government, the Korean Export
Processing Zone (KEPZ) in Chittagong
could not launch full swing operations even 17 years after the initiative.

KEPZ officials said even though the government handed over land for the zone
in 1999 and issued operational licence in 2007, it has not completed the deed
of transfer of land. As a result, it cannot lease out industrial plots to
potential investors.

On top of that, the Department of Environment (DoE) on January 22 halted
land development in the hilly zone on the Karnaphuli saying that hill cutting
violates the clearance DoE gave to KEPZ. In a notice in early February it said
the land was not being developed as per the approval. It had approved hill
“dressing” not hill cutting.

In reply, the KEPZ argued that the DoE clearance gave KEPZ a contour map
allowing it to develop the 2,500 acres in different segments, by trimming the
hills and filling up ditches. The KEPZ denies having violated any part of the
clearance.

The KEPZ added that it was strictly following the DoE environmental
clearance and if the DoE sees anything wrong then it was the clearance itself
to blame, not KEPZ.

Upon hearing KEPZ's argument on March 7, the DoE took a few days' time to
decide its next course of action. Sources said the DoE was considering
deployment of a third party surveyor to see if KEPZ violated the clearance.

“Should we refrain from touching the hills, then all we can develop here is
a cottage industry, not export-oriented industries,” says Adviser to KEPZ
Mohammad Hasan Nasir drawing attention to the hilly landscape of the area.

The KEPZ is also troubled by National Revenue Board's withdrawal of 10-year
tax holiday for all EPZs.

Korean company Youngone, which owns the KEPZ, is now running the first phase
of a massive shoe factory on 3.72 lakh square foot area. Three more units of
such size were being implemented.

It has developed 300 acres of industrial plots, 22km of internal road
network, a dormitory for foreign investors and expatriate staff. Development of
another 300 acres of industrial plots and 10km of roads were also underway.

“This hilly land was barren, dry and it used to be the den of smugglers and
pirates,” noted Nasir.

After developing the area with a budget of $200 million, this same area has
now become lush green with many lakes, which serve as the water source for the
vegetation, he said. When fully operational, the KEPZ would have 500 industrial
units, with $1 billion investment and employ around 100,000 people directly and
another 200,000 indirectly.

But different governments coming up with hurdles were holding the KEPZ back,
he said.

In 1995, the-then BNP government led by Khaleda Zia signed a memorandum of
understanding with South
Korea to set up the Korean Export Processing
Zone. The following year, the then Awami League government led by Sheikh Hasina
framed a new law to allow operation of private EPZs. In 1999, the government
handed over 2,500 acres of land to Korean company Youngone to develop the EPZ.

But Youngone could not open the zone as the BNP-led alliance government
assuming power in 2001 declined to give it operating licence without mentioning
any explicit reason. In September 2006, just before quitting power, the BNP
government conditionally issued a licence, which the KEPZ authorities deemed
unacceptable.

The last caretaker government re-issued the licence as per the private EPZ
law. But even that did not end the ordeal KEPZ had to go through.

“For an EPZ to develop and become operational, it needs four essential
clearances: operational licence, environment clearance, Customs SRO (Statutory
Regulatory Order) and deed of transfer of land,” said KEPZ President Jahangir
Sadat, adding, “Without solving these issues, the KEPZ cannot perform.”

DISAGREEMENT OVER ENVIRONMENT CLEARANCE

The DoE suspended the KEPZ's development work on the grounds of violating its
environment clearance. The DoE had issued the clearance after seven years of
exercise.

The KEPZ had hired its own consultant to prepare an environment impact
assessment study in 2002 and submitted the report to DoE in 2003. The DoE took
a long time to review the study and in 2007 it dismissed the study and asked
KEPZ to prepare a detailed study through the Centre for Environmental and
Geographical Information Services (CEGIS) under the Water Resources Ministry.

Two years later, CEGIS completed the study and the government approved it in
2009. The study gave a land development plan in which the area would be
developed in nine different elevations, ranging from six metres to 30 metres.
The plan also showed areas where the original elevation would not be changed.

The development plan was used as a guide by the KEPZ authorities for the
last two years to streamline the hills and ditches and convert certain areas
suitable for industrial installations.

In January, the DoE suddenly stopped the development work saying that the
KEPZ was cutting hills with excavators and had removed 40,000 cubic feet of
earth from 40-50 foot high afforested hills, damaging the environment.

In the notice to the KEPZ (written in English), the DoE said, “There was no
permission for cutting of hills in the first Environment Clearance Certificate
issued by the DoE on 23-11-2009.
There is permission only for dressing of hills.”

In response the KEPZ said the DoE's 2009 clearance, issued in Bangla,
clearly stated that the KEPZ was allowed to remove or cut hills as per the land
development plan in the environment impact assessment and forbids anything
outside that plan. They were just following the plan, the KEPZ said.

The KEPZ officials also argued that the 2009 clearance used the Bangla word
“mochon” in dealing with hills. The meaning of the word is unambiguously
“removal”, but now the DoE is using the word “dressing”.

“We are now waiting for the DoE to clear this issue,” said Jahangir Sadat,
adding, “We are not at fault because we were following the law. If there was
anything wrong, then it has to be the environment clearance itself.”